Question

If sales increase from $460,000 to $520,260, and if the degree of operating leverage is 6.60, net operating income should increase by: (Do not round your intermediate calculations and round your final answer to 2 decimal places.)

Answer 1

Answer: $397,716

Explanation:

Degree of Operating Leverage = Change in Net Operating Income/ Change in Sales

6.60 = Change in Net Operating Income / (520,260 - 460,000)

(520,260 - 460,000) * 6.60 = Change in Net Operating Income

Change in Net Operating Income = 62,260 * 6.60

Change in Net Operating Income = $397,716